IMF Dictated 2.5% VAT Increase – NDC

The National Democratic Congress (NDC) says Parliament’s haste to pass the National Health Insurance Bill (NHIB) is to meet a conditionality of the International Monetary Fund (IMF) to increase the Value Added Tax (VAT) by two and a half percent. The NDC’s Director of Communications, John Mahama alleged that government had agreed with the IMF to camouflage the 2.5 per cent VAT increase in order to avoid public opposition to it.

In an interview with the “Ghanaian Times” in Accra, he maintained that an IMF team was due to arrive in the country next month to appraise Ghana’s performance under the Poverty Reduction and Growth Facility (PRGF), hence government’s haste to pass the bill before the team’s arrival.

Mr Mahama showed to the ‘Times’, a copy of a Ghana-Back-to-Office Report of the IMF signed by A. Bio-Tchane, an official of the IMF and dated December 19, 2002, which stated that the Ghanaian authorities in a meeting with the officials of the fund had given promising indications of its policy intentions which included a promise to incorporate increase in VAT rate. “It said the budget will incorporate a five percentage point increase in the VAT rate, albeit rebranded to make it politically more palatable”.

Mr Mahama noted that the two parties later agreed to have the five per cent reduced to 2.5 per cent adding that the increase in VAT rate has been concealed under the NHIS.

He maintained that a further 2.5 per cent increase in VAT would increase the burden on industry, commerce and services and further reduce Ghana’s attractiveness as an investment destination. “Sine the NPP came to power, it has increased numerous taxes and levies that are stifling economic development”, he added.